April 02. 2012 9:00AM

Set the tone at the top: Leaders must be values-driven

Leadership

By Daniel Schroeder

  
Question:

"What do you think about this situation? An executive received notification of his bonus based on his company's 2011 performance. Angered and upset that it was so small, he sent an e-mail to his wife complaining bitterly about how hard he had worked, how under-appreciated he is, etc. The coup de grace is the 'paltry' bonus was 'only' $300,000! To make a long story, short, the executive hit 'reply all' and sent the message to a bunch of people he didn't mean to and is now under criticism for his greed and insensitivity. The company has lost money the past few years and is currently downsizing and restructuring."

Answer:

Where do I begin? This is, unfortunately, an all too common story. Countless stories abound of executives and organizations who fail to operate with integrity or credibility. Consider the scandals with Enron, Arthur Anderson, etc. and, more recently, the focus on steroid use in sports, specifically baseball and our very own Milwaukee Brewer fan favorite, Ryan Braun. Or, consider the blistering, scathing comments of Greg Smith (printed as a New York Times editorial) as he disgustedly exited Goldman Sachs after over a decade with the firm. Smith was brutally candid about why he was leaving; he could no longer tolerate the unbridled greed at Goldman Sachs.

Had the executive from your question not hit "reply all," this story might never have gotten out. We've all sent e-mails inadvertently. Some of us have sent angry e-mails and then wished we hadn't. In any event, that the message got out is only part of the story. The real issue has to do with the values reflected in the message.

Extensive literature exists dealing with how values relate to effective managerial leadership. Values drive behavior. At the individual level, values comprise character. At the aggregate level, the character of the individuals the organization employs helps to define its culture. Values drive not only the behavior of the person who holds the value, but also of those whom they influence. In the context of a workplace, it is important to note that employees do what leaders model. Values-driven leaders set a powerful tone at the top.

What are the core values that drive the leaders at your organization? Creating an ethical, virtuous, values-driven organization can be a powerful advantage. The ethical tone of the organization translates to ethical behavior that permeates all work relationships, building trust and confidence among employees and constituents.

One of the professional hats I have worn for nearly 10 years is that of judge for The Torch Awards for Ethical Enterprising through the Better Business Bureau's Wisconsin Center for Character Ethics. If you go to the BBB's web site (www.wisconsin.bbb.org) you will see a virtual who's who of Wisconsin enterprise among the Torch Award recipients. Organizations must demonstrate exceptional performance in the area of leadership commitment to ethical practices, communication of ethical practices, organizational commitment to ethical practices, organizational commitment to performance management practices, commitment to ethical human resources practices, and commitment to the community.

My call to action for today's leaders and organizations is to move beyond mere self-interest toward a multiple stakeholder perspective that takes aim at the triple bottom line of people, planet, and profit. Paraphrasing the economist Milton Friedman, "The primary challenge of any organizing system, including capitalism, is to arrange circumstances in which greed does the least amount of harm."

By the way, lest you think what I'm talking about is all just something that "sounds nice" or "feels good," and little more, I direct your attention to an organization called the Ethisphere Institute (www.ethisphere.com) which researches and designates the world's most ethical organizations. Among other things, this organization has documented that organizations that behave ethically realize performance gains. For example, organizations that have been designated as "most ethical" outperformed the S&P 500 and the FTSE 100 during the period 2007-11.

I also direct your attention to a book by Dr. Denis Collins, a professor of business at Madison's Edgewood College and a fellow Torch Award judge, Essentials of Business Ethics: Creating an Organization of High Integrity and Superior Performance. Collins makes a strong case using an ethical framework as a performance model for improving organizational effectiveness.

Obviously, the point of all of this is not simply to engage in some interesting, analytic dialog. Rather, the aim is to truly understand that leaders influence corporate culture (i.e., "the way we do things around here"). What was the influence of the executive whose e-mail went out in error? I have a sneaking suspicion that this executive was simply expressing his values-driven feelings. Unfortunately for him, others got a glimpse of who he really is at his core and it wasn't pretty.

Understanding self and other is a foundational competency for effective leadership. From my perspective, it is imperative for leaders to reflect on how their values impact their actions and, by extension, the practices of the organizations they lead.

Ultimately, I urge leaders to be mindful of the tone they are setting. Specifically, I urge leaders to be careful...

Be careful of your thoughts, for your thoughts become your words...

Be careful of your words, for your words become your actions...

Be careful of your actions, for your actions become your habits...

Be careful of your habits, for your habits become your character...

Be careful of your character, for your character becomes your destiny...!





Daniel A. Schroeder, Ph.D. is president of Brookfield-based Organization Development Consultants Inc. (www.OD-Consultants.com). He can be reached at (262) 827-1901 or Dan.Schroeder@OD-Consultants.com

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